European Council

3.57 pm

The Prime Minister (Mr David Cameron):
I am sure that the whole House will join me in paying tribute to Trooper Ashley Smith from the Royal Dragoon Guards, who was killed in Afghanistan last week. He died serving our country, and our thoughts are with his family and friends. We have also heard news this morning that a member of 40 Commando Royal Marines has died from his injuries. He is the 300th member of the British armed forces to lose his life as a result of the conflict in Afghanistan.

When such a tragic milestone is reached, we should re-emphasise our support for our armed forces and for all that they do. Inevitably, some will use this moment to question our mission and our purpose there. We are paying a high price, but let me be clear: we are in Afghanistan because the Afghans are not yet capable of securing their own country from terrorists. It is for our own national security that we help them. When they can do it alone, we will leave. In the meantime, we must give our armed forces everything they need to get the job done, and that includes our unequivocal support right across the country.

With permission, I should like to make a statement on last Thursday's European Council. It was rightly focused on securing the economic recovery, and it was unanimous that this required early action on budget deficits. The Council also dealt with Europe's growth strategy, the need to sort out the problems in the eurozone and our approach to the G20. It also delivered important progress on Iran. I would like to take each point in turn.

On deficits, the conclusions from the Council could not be clearer. Delaying action would entail "major risks", and the Council called on member states to meet budgetary targets "without delay". Since the last European Council, the problems in Greece and the scale of the sovereign debt crisis have become apparent to almost everyone. That is why there is such unanimity across the EU for early action. It is also why President Barroso paid tribute to the efforts the UK Government, saying:

"Consolidation is necessary for confidence and without confidence there will be no growth."

On growth, the Council agreed a new strategy called Europe 2020. This follows on from the Lisbon agenda, the aim of which was to make Europe the most competitive market in the world. The document has some worthwhile objectives, including raising the level of research and development and improving education. This should not interfere with national competencies, so I secured explicit agreement that the new strategy must be

"fully in line with the relevant Treaty provisions and EU rules and shall not alter Member States' competences".

We should be clear that all the strategies in the world cannot conceal the fact that EU countries all need to get to grips with the real problems that harm our competitiveness-not by endlessly setting targets, but by taking action. This includes action on the extent of our debts, on the affordability of our pensions and on the scale of our welfare dependency. Europe has never lacked strategies, but European countries have frequently failed to deliver them.

We will also continue to press for the real stimulus that European economies need-that is, more trade, more international investment and more action to break 21 Jun 2010 : Column 36
down the barriers to business. This means pushing for agreement on Doha, reforming and completing the single market and making the process of trade easier. Even without Doha, there is a huge amount that countries across the world can do to facilitate trade. I want Britain to be one of the driving forces in helping to bring this about.

Next is the eurozone. Britain is not in the euro, and, let me be clear: we are not going to join the euro-[Hon. Members: "Hear, hear."]-but a strong and successful eurozone is vital for the British national interest. Already, about half our exports go to the EU, four fifths of them to the eurozone. As this House is aware, however, with the situation in Greece and the need for a support package from the other eurozone members, there is no doubt that the eurozone as a whole faces real challenges. So I was generally supportive of the Council's efforts to strengthen the eurozone governance arrangements, but I was equally determined to ensure our national interests are protected.

On budget surveillance, let me be clear: the UK Budget will be shown to this House first and not to the Commission. Of course, we will share projections and forecasts, just as we do with the International Monetary Fund and other international bodies: so, co-ordination and consultation, yes; clearance, no, never.

On sanctions, for those who breach their economic obligations, the Council agreed that

"Member States' respective obligations under the Treaties will be fully respected".

Because of this, and because of the special opt-out negotiated by the last Conservative Government, sanctions cannot be applied to the UK under the current framework.

Sorting out the eurozone and adding to its governance arrangements is clearly vital for Europe. There may well be significant changes coming down the track. Whether they require treaty changes or not, our position will be the same: we will back measures that will help sort out the eurozone; we will not back measures that pass power from the UK to Brussels. As we are not members of the euro, we will not back measures that draw Britain further into financial support for the euro area.

On the G20, the EU Council discussed our priorities for the upcoming meeting. As well as taking action on the deficit, the Council also agreed about the importance of reforming the financial system. It is vital that the meeting in Canada back the right action on reserves and on capital.

On the issue of a banking levy, the European conclusions were helpful. We wanted the Council to endorse the idea of countries introducing a levy on financial institutions to ensure they make a contribution to rebuilding public finances. We did not want the Council to mandate a particular form of levy or how the money raised should be used. I am pleased to say the Council conclusions reflect that approach.

On Iran, we argued that it is time for action, not just words. The Council conclusion refers to measures, including restrictions on trade, banking, transport and the oil and gas industry. Final agreement will be reached at the Foreign Ministers' meeting.

The Council also reached important conclusions on Iceland's application to join the EU. This country should be a good friend to Iceland and a strong supporter of continued EU enlargement. But Iceland does owe the 21 Jun 2010 : Column 37
UK £2.3 billion in respect of the compensation paid by the Government to UK investors, following the collapse of its banking sector. We will use the application process to make sure that Iceland meets its obligations, because we want that money back.

Finally, it is important that even in difficult times we support people in the poorest countries who suffer from the most severe poverty. The European Council reaffirmed its commitment to achieving development aid targets by 2015 and, supported by the UK, to review that annually.

The Council delivered good outcomes for Britain. Our citizens do not want new structures to talk about things, but a new resolve to do things, such as getting a grip of our massive budget deficit, developing the single market and building the conditions for strong, sustainable and balanced growth. That is what the Council was all about. I commend the statement to the House.

Ms Harriet Harman (Camberwell and Peckham) (Lab):
May I join the Prime Minister in paying tribute to the two soldiers who have lost their lives: Trooper Ashley Smith from the Royal Dragoon Guards; and a Royal Marine from 40 Commando Royal Marines. As the Prime Minister has said, 300 members of our forces have now given their lives in Afghanistan in the service of our country. We pay tribute to their bravery and honour their sacrifice, and our thoughts are with their families. I strongly agree with the Prime Minister about the cause for which our soldiers are fighting in Afghanistan: they are fighting there to keep our streets safe here. That is why the Opposition join the Government in support of our troops and their mission. As we approach Armed Forces day, let us remember all our servicemen and women, whether they are stationed abroad or at home. Their skill and courage are unsurpassed.

I thank the Prime Minister for his statement. First, may I endorse his support for the summit's declaration on Iran, which again shows that on issues of international concern, we who are EU member states have a bigger impact when we combine our efforts? Does he agree that while the threat of a nuclear-armed Iran remains a matter of the utmost concern, the international community is now more united than ever before in searching for a peaceful solution, and that the active EU diplomacy we have seen in recent years has played an important part in that? Will he tell us whether there is a timetable for further EU action on Iran? Will he confirm the importance not only of sanctions and diplomatic pressure, but of international engagement with the people of Iran? Will he therefore give an undertaking that the BBC Farsi service will be protected from any threats to the budget of the BBC World Service?

Secondly, may I also welcome the EU summit's strong commitment to meeting the millennium development goals by 2015 and the Prime Minister's endorsement of that? The terrible crisis of drought, food shortages and starvation in Niger is a vivid reason why we must have international action on development. Will he not be a stronger voice in the EU, for the whole of the EU to make development a priority, if his Government continue to prioritise development? Following the Labour Government's commitment, the European Commission recommended that all EU member states should consider legislating to enshrine the 0.7% aid target, which the Labour Government established. Will the Prime Minister take forward in this Session of Parliament the Bill that we introduced to make that target legally binding?

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Is it not the case that we can only be effective in Europe if what we say and do there is matched by what we say and do at home? In that regard, may I commend the Prime Minister on his reference in his pre-summit article to what he describes as the

"shocking inequality of women in many parts of Europe"

and what he says is the "urgent need for change"? If he recognises the "shocking inequality" of women elsewhere in Europe, can he act on it here? Will he show Europe that he means at home what he says in Brussels by committing himself to implementing the Equality Act 2010 as soon as possible and to pressing on with the plan to make employers publish the gender pay gap?

What will the Prime Minister do about his Tory MEPs who clearly have not got the message at all and abstained in the vote on the millennium development goals, and who voted against measures to combat gender inequality only last week? He thinks it is "shocking", but they seem to be all in favour of it.

The Council focused on economic growth, and I welcome the summit's adoption of the Europe 2020 strategy for growth, which stated that

"priority should be given to growth-friendly budgetary consolidation strategies"

and that

"increasing the growth potential should be seen as paramount to ease fiscal adjustment in the long run."

In other words, it said, "Don't undermine growth when you're cutting borrowing", and, "You need growth to be able to bring borrowing down." According to the official summit conclusions, one of its main objectives is

We agree with that. That is what the Prime Minister signed up to in Brussels. However, he is doing something very different here at home. How does it help growth to cut business investment support, and how does it

"unlock the EU's growth... starting with... energy"

to cancel the loan to Sheffield Forgemasters allowing it to build the next generation of nuclear power stations? Does this not mean that Europe, as well as the United Kingdom, will lose out as South Korea and Japan proceed with that work?

Let me turn to the important question of financial services. We welcome the intention to implement a new system of levies and taxes on financial institutions, and to explore an international approach. May I ask the Prime Minister to say more about the progress report on the work of the taskforce on economic governance? There is a British representative on it, and the taskforce has implications for the United Kingdom as well as for eurozone countries. Which, if any, aspects of enhanced economic governance might be applied to the United Kingdom?

This was the Prime Minister's first European Council. He is now representing our country in Europe. So is it not time for him to have a sensible rethink about the wisdom of continuing to exclude himself from the grouping of centre-right political leaders? The European People's party includes President Sarkozy, Chancellor Merkel, and the Prime Ministers of Sweden, Italy, Poland and many other countries; but instead of meeting them to prepare for the summit, the Prime Minister has a meeting with one Polish MEP to prepare for Britain's contribution.

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The general election is over. The right hon. Gentleman is Prime Minister now. Will he put aside his pandering to his Europhobic Back Benchers and agree with his Liberal Democrat coalition partners on this point? That is what would be in Britain's interests.

The Prime Minister:
Well, the right hon. and learned Lady is right about one thing: the general election is over.

The right hon. and learned Lady is absolutely right about Iran. We do need great unity on this issue; and Europe forging ahead together with a very strong statement about sanctions, then introducing sanctions, is right. She asked when it would be finalised. That will happen on 26 July, at the Foreign Affairs Council, and the sanctions should come into effect in October.

The right hon. and learned Lady asked about the BBC service in Farsi. I can confirm that it will continue to be funded well, because it is important. We should be looking at all the elements of soft power and how we project our influence in the world, and that is clearly one of them.

The right hon. and learned Lady mentioned the millennium development goals and the importance of prioritising development. We agree with her about that. It was on the insistence of the British, among others, that we put the annual review of development assistance into the Council conclusions, partly so that we could ensure that other countries are living up to the obligations under which they place themselves. We will continue to do that, although we are clearing up the most almighty financial mess at home. As for making it legally binding, we agree with that, and will produce plans to make it happen.

The right hon. and learned Lady spoke about consistency, and about the importance of recognising the gross inequality of women. We will set out measures for greater transparency, including transparency in pay. We are in favour of that.

The right hon. and learned Lady mentioned our MEPs at great length. I can tell her that I will be keeping a careful watch on what Labour MEPs vote for, because they do not always vote in a sensible way.

Chris Bryant (Rhondda) (Lab):
What about the Liberal Democrats?

The Prime Minister:
We will be having a look at them too.

The right hon. and learned Lady also spoke at great length about borrowing. She mentioned the dangers of falling behind South Korea. I have to say that if we followed her advice, I think we would be falling behind North Korea, but let me say this to her about the issue of borrowing. The Council's conclusion could not be clearer. It said:

Where is it more warranted than in Britain, where Labour left us with a £155 billion public sector deficit?

It is interesting that, following the sovereign debt crisis and what has happened in Greece, the Labour party is completely isolated in Europe in not believing 21 Jun 2010 : Column 40
that we need to take early action on the deficit. Every other country is having to take this sort of action, including painful action. The right hon. and learned Lady does not have to talk nonsense because she is not taking part in the Labour leadership election, so she should talk some sense and recognise that we have to get our deficit in order, we have to take action and it is the right thing to do.

Richard Ottaway (Croydon South) (Con):
The Council called on the Foreign Ministers at their next meeting to implement the United Nations sanctions against Iran. Does the Prime Minister agree that that is a big step in the twin-track strategy of combining sanctions with engagement and assistance, and does he have in mind any event or date that would trigger a definitive assessment of whether or not the twin-track strategy against Iran is actually working?

The Prime Minister:
I am grateful for my hon. Friend's question. The key is to try to get the maximum number of countries behind the most specific list of sanctions possible. I think that what we have had in recent years is a lot of talk about sanctions and a lot of commitments to sanctions. Now is the time for countries actually to come up with what they are specifically going to target in terms of bank accounts, trade finance, oil and gas works and the rest. That is what should happen. My hon. Friend asked for a specific date as to when this should be assessed; I think it is an ongoing process. What we are trying to do here is tip the balance in the mind of Iran in terms of making progressing with a nuclear weapon more expensive, in order to get it to think again. There is no one date for that; it should be continually assessed.

Ms Gisela Stuart (Birmingham, Edgbaston) (Lab):
May I join the Prime Minister in paying tribute to the 300th member of the British armed forces who lost his life, not least because he lost it in my constituency of Birmingham, Edgbaston, where the Royal Centre for Defence Medicine and the medical facilities are located?

On the European Council meeting and the Prime Minister's response, he was very positive about the 2020 agenda. Given that the 2010 Lisbon agenda was vacuous, useless and did not deliver anything, why does he think the 2020 agenda, which is going to build on that, will produce anything more useful?

The Prime Minister:
First of all, may I agree with what the hon. Lady says about the medical facilities in her constituency? Like her, I have been to the Selly Oak hospital and what is done there is incredibly impressive, as is the fact that our returning servicemen and women have access to all the many excellent hospitals in Birmingham, so that all the specialities can be dealt with.